The Role of Sustainable Supply Chains in Reducing Environmental Impact in Australia
A sustainable supply chain is about integrating environmental, social, and economic concerns into the entire value chain of a business. It encompasses the management of resources, including raw materials, energy consumption, and waste generation. A sustainable supply chain aims to reduce the environmental impact of business operations and contribute to the overall sustainability of the business and the communities it operates in. It involves nurturing partnerships with ethical suppliers and ensuring compliance with environmental policies and regulations.
Supply chain leaders are increasingly aware of the importance of sustainability performance. With over 90% of an organisation’s greenhouse gas emissions and 50% to 70% of operating expenses are linked to supply chains, concentrating on supply chains is crucial to overall environmental, social, and governance (ESG). Apart from mitigating risks and ensuring compliance, organisations are exploring methods to incorporate sustainability into supply chain operations to generate lasting value. As stakeholders demand proof, they can trust that their investments are contributing to real, measurable results. A survey of nearly 600 executives by EY in 2022 revealed a crucial need for more visibility and tangible measurements to gauge progress. EY’s research implies that challenges to sustainability initiatives include initial upfront expenses and a lack of a definitive business justification to back the spending. The survey results highlighted many long-term strategies but difficulty implementing and monitoring them successfully. In order to drive demand from stakeholders, companies must work towards making these ambitious environmental commitments a reality rather than simply PR lip service if they wish to succeed in the long run. With sustainable supply chains playing such an integral part in organisational sustainability goals, businesses need to take action sooner rather than later so that the right steps are taken to deliver meaningful change and contribute towards a better future.
The environmental impact of unsustainable supply chains in Australia is significant and concerning. These supply chains contribute to high levels of carbon emissions and the depletion of natural resources. The carbon emissions from these supply chains can be attributed to factors such as long transportation distances, inefficient use of energy, and reliance on fossil fuels. This leads to increased greenhouse gas emissions and contributes to climate change. Specific examples of environmental costs associated with these unsustainable practices include air and water pollution, habitat destruction, soil erosion, and biodiversity loss.
In Australia, the government has taken proactive measures to promote sustainability in supply chains. These targets aim to make all packaging reusable, recyclable, or compostable by 2025 and reduce packaging waste by 25%. The Australian Packaging Covenant Organisation (APCO) is crucial in driving industry-led actions to achieve these targets. APCO collaborates with businesses, governments, and industry partners to develop and implement sustainable packaging solutions (https://apco.org.au/national-packaging-targets).
Globally, examples such as Unilever have worked to reduce transport costs and emissions with Oracle’s cloud-based transportation solutions. Unilever considered Oracle’s solutions to improve sustainability and efficiency in its supply chain. These solutions provide predictive insights for better shipment execution and cost optimisation. Oracle’s solution allows Unilever to access real-time data for making informed transportation decisions. In just 18 months, Unilever has already achieved significant cost savings and a 16% reduction in carbon emissions. This shows that proactive emission reduction efforts can yield significant gains, even for companies with large networks. Supply chains can minimise environmental impact by minimising waste generation and adopting solution-driven systems.
The government, businesses, and industry partners recognise the importance of sustainability in their operations and actively seek ways to reduce their environmental impact. This shift in market trends reflects the growing awareness of the need for sustainable practices. It presents opportunities for businesses to differentiate themselves and capture market share by adopting responsible supply chain management strategies. Furthermore, consumers see companies with sustainable supply chains as socially responsible, which builds trust and loyalty.
Responsible Supply Chains and Supplier Diversity
Responsible supply chains and supplier diversity are also key components of sustainable supply chain management. By incorporating ethical and sustainable practices throughout the supply chain, companies can minimise their negative impact on the environment and local communities while simultaneously driving positive change.
Companies can start by conducting thorough due diligence on their suppliers to implement responsible practices, ensuring that they meet ethical and sustainability standards. This includes assessing suppliers’ labour practices, environmental performance, and adherence to human rights regulations. Companies can create a more sustainable and responsible supply chain by engaging with suppliers who share these values.
Supplier diversity also plays a crucial role in responsible supply chains. By diversifying their supplier base, companies can promote inclusivity and support underrepresented communities. Supplier diversity initiatives help to create economic opportunities for minority-owned, women-owned, and small businesses. This fosters a more equitable business environment and enhances innovation and competitiveness.
Industries such as fashion, electronics, and packaging are experiencing high impacts from circular business models. These models promote a closed-loop supply chain, where products are designed to be reused, recycled, or repurposed.
Reduced Environmental Costs
One strategy for reducing environmental costs is optimising shipment capacity. By maximising the utilisation of transportation vehicles, companies can reduce the number of trips needed to transport goods, resulting in lower fuel consumption and greenhouse gas emissions. This can be achieved through better planning and coordination of shipments, ensuring that vehicles are fully loaded and minimising empty trucks.
Collaborating with suppliers to implement sustainable procurement practices is another effective strategy for reducing environmental costs. This involves working with suppliers who prioritise sustainable sourcing and production methods, such as using renewable energy or reducing water usage.
Businesses often face significant challenges in meeting these carbon emissions reduction targets, especially when it comes to supply chain sustainability. The complexity of global supply chains, dependence on multiple suppliers, and lack of transparency can make tracking and managing emissions across the entire value chain difficult.
To effectively address these challenges, data and visibility play an essential role. By collecting and analysing data on emissions at each stage of the supply chain, organisations can identify the major sources of emissions and pinpoint areas for improvement. This data-driven approach enables businesses to make informed decisions and implement targeted strategies to reduce carbon emissions.
Visibility within the supply chain is also crucial for tracking emissions. With increased visibility, organisations can collaborate with suppliers, promote ethical sourcing, and ensure responsible environmental practices–this transparency promotes accountability and encourages supplier diversity.
Challenges: Cost Considerations for Businesses
One factor that contributes to costs is the durability and manufacturability of products. Sustainable supply chains often involve the use of more durable materials and designs that enable products to be easily disassembled and remanufactured. However, these design changes may come at a higher cost compared to traditional products.
Timing of returns and the extent of consumer use also impact costs. Sustainable supply chains often encourage product returns and recycling, requiring businesses to invest in collection and processing systems. This incurs additional costs in terms of logistics and infrastructure.
Furthermore, the supply of returns also plays a role in cost implications. If the supply of returned products is high, businesses must allocate resources for processing and managing the reverse supply chain network.
Overall, the cost considerations for businesses implementing sustainable supply chains include the expenses related to encouraging, collecting, and processing returns and the management of the reverse supply chain network. To mitigate these costs, businesses should evaluate the financial feasibility of these initiatives and explore partnerships and collaborations within the supply chain to achieve economies of scale.
As the global supply chain continues to expand, companies are struggling to keep up with environmental and social demands. A sustainable supply chain considers environmental, social, economic and legal concerns across its entire set of processes from production to consumption. This holistic approach can help reduce waste and environmental impact while improving labour conditions and preventing worker exploitation.
In conclusion, as Australia continues to address the pressing issues of environmental sustainability, supply chains play an indispensable role in shaping a greener future. Harnessing knowledge and strategies to develop efficient, eco-friendly supply chains isn’t just good for the environment, but it’s also pivotal for businesses looking to stay competitive and forward-thinking.
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